The retail industry is ever evolving, specially after the 2008 economic recession several factors have led to changes in the way the industry is addressing new profitable ways of doing business. There is increased competition and cost cutting that has led to mobile penetration and efficincies across the supply chain. Macy’s Inc. currently owns Macy’s, Bloomingdales (which has a smaller footprint but is more upscale and is considered "high fashion") and Bluemercury (costmetics and a different segment). Macy’s revenue had been decreasing since 2015 but it has started to show signs of recovery since early 2018. MAcy’s is focused on the north star strategy which is focused on future growth and other strategies.
After looking at their portfolio the main question is whether Macy’s adds value to their subsidiaries and whether they need to own Bloomingdales’ to add value to them in turn. These two brands within the Macy’s Inc portfolio, Macy’s and Bloomingdales do not occupy the same space in consumers minds.
Bloomingdale’s has their own set of customers which are very different from consumers of the Macy’s group at large and there really is less value to be captured from the larger group of consumers because the consumers are not the same and do not share the same requirements. The loyality program as an example is something that can be run independently from the larger larger group. The loyalty program run by both stores is not something that is proprietary and could be easily replicated across the stores. However this is only one example of the many cases. If Bloomingdales would be on it’s own they could control where they need to be connected with the target audience as opposed to Macy’s driving these decisions. Bloomingdales could make focused decisions about their target demographic. Bloomingdales evern uses their own private label brands that are not common with Macy’s. While this isn’t something that is expected it is another reason that these stores don’t share synergies across the two formats. Even the locations of their stores are different which translates into different distribution strategies.
Macy’s does provide financial support but in a functioning market Bloomingdales could easily independently raise capital and pruchase or lease space to operate these stores. This cash advantage that is provided by Macy’s is not something that would be hard for Bloomingdale’s to access. A lot of current internal functions that are currently provided by Macy’s could be provided by independent contractors/ consultants and companies like UPS/ Fedex and Accenture, etc. Startups are among other alternatives that Bloomingdales could explore logistics and systems functionality. As an examples, pickup in store is something that is a growing trend and is also not something that is proprietary to Macy’s. Further there are quite a few startups that provide delivery and pickup services.
Evidently, a continuous profitable operations with sustained stores proves that Bloomingdales has independent value in the marketplace. Macy’s is not benefiting from owning Macy’s + Bloomgindales as a combined portfolio and Macy’s is likely suffering from a diversification discount. There aren’t enough strategies across Bloomingdales and Macy’s for them to be owned by one group. There are several other factors that need to be evaluated for this alliance to exist but these are preliminary views.